A strong El Nino is coming, and Indonesia buys its rice in dollars

Two researchers at Singapore's ISEAS-Yusof Ishak Institute, Elyssa Kaur Ludher and Paul Teng, argue that Southeast Asia should not treat the coming El Nino as another dry year. El Nino is a warming pattern in the Pacific Ocean that usually pushes this region into drought. They expect a strong one to peak between November 2026 and February 2027, and warn that rice yields across the region's five biggest producers could fall by 2 to 8 per cent. Writing on Fulcrum, they name Indonesia, the Philippines and Malaysia as the most exposed.

The reason is that two weaknesses stack on top of each other. These countries buy a large share of their rice abroad, and their currencies are weak, so every imported tonne costs more in local money. A poor harvest overseas and a soft currency at home hit the same shopping basket twice. The authors add a problem that started far from any rice field: after the Strait of Hormuz closed during the US-Iran war, fertilizer and fuel supplies tightened and got more expensive. Farmers who paid more for fertilizer this season, or used less of it, are walking into the drought with thinner crops already.

Their central point is that the danger is not empty shelves but prices. The rice will exist somewhere; the question is who can afford it. Scarcity, broken supply routes, and hoarding can push prices up well before any real shortage arrives. So they want governments to handle food the way they handle security, across several ministries rather than one, to test their supply routes in advance and time import orders together instead of bidding against each other, and to produce more of their own fertilizer. ASEAN has a farming and food plan running from 2026 to 2030, and the authors want it used before the peak, not after it.

Why it matters

If you buy rice, cooking oil, or eggs, this is a warning about the months around the turn of the year, when the drought should bite hardest. Watch two things: whether the government starts building rice stocks early, and whether the rupiah holds, because imported rice is paid for in dollars and a weaker currency raises the shelf price before a single harvest fails. Households with little in savings feel it first, since food takes the biggest share of what they spend.